Chesapeake Energy 2014 Annual Report Download - page 36

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• regulatory investigations and administrative, civil and criminal penalties; and
• injunctions resulting in limitation or suspension of operations.
For our non-operated properties, we are dependent on the operator for operational and regulatory compliance.
Our midstream and compression operations are subject to all of the risks and operational hazards inherent in
transporting oil and natural gas and natural gas compression, including:
• damages to pipelines, facilities and surrounding properties caused by third parties, severe weather, natural
disasters, including hurricanes, and acts of terrorism;
• maintenance, repairs, mechanical or structural failures;
• damages to, loss of availability of and delays in gaining access to interconnecting third-party pipeline;
• disruption or failure of information technology systems and network infrastructure due to various causes,
including unauthorized access or attack; and
• leaks of oil or natural gas as a result of the malfunction of equipment or facilities.
A material event such as those described above could expose us to liabilities, monetary penalties or interruptions in
our business operations. While we may maintain insurance against some, but not all, of the risks described above,
our insurance may not be adequate to cover casualty losses or liabilities, and our insurance does not cover penalties
or fines that may be assessed by a governmental authority. Also, in the future we may not be able to obtain insurance
at premium levels that justify its purchase.
We are subject to complex laws and regulations relating to environmental protection that can adversely
affect the cost, manner and feasibility of doing business, and further regulation in the future could increase
costs, impose additional operating restrictions and cause delays.
Our operations and properties are subject to numerous federal, regional, state and local laws and regulations
governing the release of pollutants or otherwise relating to environmental protection. These laws and regulations govern
the following, among other things:
• conduct of our exploration, drilling, completion, production and midstream activities;
• amounts and types of emissions and discharges;
• generation, management, and disposition of hazardous substances and waste materials;
• reclamation and abandonment of wells and facility sites; and
• remediation of contaminated sites.
In addition, these laws and regulations may impose substantial liabilities for our failure to comply or for any
contamination resulting from our operations, including the assessment of administrative, civil and criminal penalties;
the imposition of investigatory, remedial, and corrective action obligations or the incurrence of capital expenditures;
the occurrence of delays in the development of projects; and the issuance of injunctions restricting or prohibiting some
or all of the Company’s activities in a particular area. Future environmental laws and regulations imposing further
restrictions on the emission of pollutants into the air, discharges into state or U.S. waters and hydraulic fracturing, or
the designation of previously unprotected species as threatened or endangered in areas where we operate, may
negatively impact our industry. We cannot predict the actions that future regulation will require or prohibit, but our
business and operations could be subject to increased operating and compliance costs if certain regulatory proposals
are adopted. In addition, such regulations may have an adverse impact on our ability to develop and produce our
reserves.
Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in
increased costs and additional operating restrictions or delays.
Several states are considering adopting regulations that could impose more stringent permitting, public disclosure,
and/or well construction requirements on hydraulic fracturing operations. In addition to state laws, some local
municipalities have adopted or are considering adopting land use restrictions, such as city ordinances, that may restrict
or prohibit the performance of well drilling in general and/or hydraulic fracturing in particular. Our inability to secure
sufficient amounts of water, or to dispose of or recycle the water used in our operations, could adversely impact our
operations in certain areas. There are also certain governmental reviews either underway or being proposed that focus
on deep shale and other formation completion and production practices, including hydraulic fracturing. These studies